Top 10 Foreclosure States

Rising unemployment is exacerbating the already critical foreclosure crisis, because sadly, while you can return your Hyundai if you lose your income — you’re kinda stuck with that 4 bedroom ranch with the in-ground pool.

Foreclosures don’t just affect the families who are losing their homes — it affects the value of the housing in the area. When a foreclosed house goes to auction — it drives down the value of other, similar houses nearby. Sinking housing prices make it difficult or impossible for homeowners to refinance or even move, and a combination of lots of foreclosures and little available credit for would-be buyers is disastrous — and increasingly common.

Now unemployment is being blamed for a spike in foreclosures in states like Illinois that never had the kind of extreme speculative housing bubble that you saw in California and Florida.

Here are the Top 10 Foreclosures States from Forbes Magazine.

1. California
2. Florida
3. Arizona
4. Nevada
5. Illinois
6. Michigan
7. Ohio
8. Texas
9. Georgia
10. Virginia

Top 10 Foreclosure States [Forbes]
(Photo:dno1967)

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  1. GuJiaXian says:

    While I think that all the foreclosures (and the general state of the economy) are terrible, I have to say that purchasing our first home late last year in Georgia was quite painless and considerably less expensive than it could have been.

    • GuinevereRucker says:

      @GuJiaXian: It’s gotta be better than the inflated prices near Boston! We paid $93,500 for a 40 year old condo with 550 square feet, and we’re in the suburbs.

      I do love our place, but the cost of housing can get extreme. I heard that this was due to the availability of credit which in turn drives up prices. Imagine if everyone bought houses with cash only – would prices drop a lot?

      • chiieddy says:

        @GuinevereRucker: $167k for a suburban (almost urban) condo in the Boston ‘burbs for 785 sq ft (2 bdrm) here in 2001.

        Here’s the problem. I was good. I got a 30 yr fixed. I pay my bills.

        I want to sell and get a house. Will I have any equity in my property? I have no idea. Last estimate based on property tax has my value at $180k and that’s likely a year off.

      • Necoras says:

        @GuinevereRucker: No, nobody would own houses. Buying with cash is great, but it means you have to save for a long time to be able to afford it. If you have a 30 year mortgage on $150,000, you pay $150K in principal and $300K (depending on interest rates) in interest) with a $1400 a month mortgage payment. That’s probably about $1000 in interest (up front, this number will decline and principal will go up) $300 in tax and insurance and $100 in principal. (these numbers are all very vague, but they make the point)

        If you didn’t have a mortgage you’d be paying say $1000 in rent for the same space, plus $100 a month for renters insurance (for your stuff) and nothing for property taxes. This leaves you $300 a month to put into savings for a house. Over 30 years that’s about $100K plus interest. Compound interest on your savings gives you probably around $200-300K (again, rough numbers).

        Now, $300K will buy you a nice house… today and in the right market. But in 30 years? Not so much. And there are a few problems with this scenario. First and foremost is getting people to continually put that $300 into savings every month. If the bank makes you (mortgage) you’ll do it. If it doesn’t, you probably won’t. Also, if you have a mortgage then your interest goes down and you’re paying more towards principal over time. That is, at the end of your mortgage you’re putting closer to $1100 into “savings” (principal) than $100. If you rent that whole time then your rent will probably go up with inflation. In the long run you won’t probably have enough cash to buy a new home equal to what you could have bought up front with a mortgage.

        A mortgage really is the best long term strategy for owning land. Over time land will increase in value at a constant rate which is slightly better than inflation because of scarcity.

        What happened recently was that everyone looked at that rule (and it’s been fairly true over time) and translated it to land (housing) prices will NEVER go down. This was a bad idea (and wrong). With that fallacy at the root of it people borrowed insane amounts of money not to afford a house, but because it was supposed to be a sure thing investment. I can afford to pay $1 million today because in five years the land will be worth $2 million. Didn’t happen (duh).

        If people only bought land with cash, nobody would own houses, because in a normal free market cash doesn’t gain value (because of inflation) as fast as land does (because of land improvements and scarcity). Mortgages are a good thing when used correctly. But, like buying on margin, they become very dangerous when used stupidly.

  2. nakedscience says:

    Arizona is #3! GO my home state! Oh, wait, I shouldn’t be proud of that :D

    Let me say, though, come June I might be getting a roommate (something I’ve been fighting against for years because I’m much happier living alone, even in the ghetto) to help with finances and help out a disabled friend, and holy CRAP this is a renter’s market. We will be livin’ like kiiiings. So um, I guess I’m selfish.

    • acwatts says:

      @nakedscience:

      You hit the nail on the head as to why this is happening – atleast in the Phoenix area….prices got so high that a person with a decent job who makes good choices and has good credit still couldn’t afford to buy outside of the ghetto – unless you wanted to spend 3 hours a day sitting in your car… Thats when you know prices have to fall!

    • wee0x1B says:

      @nakedscience: Proud or not, last August I sold my dinky, overpriced house in California for a decent profit and bought a huge place on an acre lot in Scottsdale. Paid about half what the place sold for in 2000.

      Real sorry the last guys to live there took out too many loans so they could fix the place up and try to unload it for a profit, but I really like the remodel they did. I mean, they bought top-notch stuff. Viking, Jenn-air, the works. Sorry about the eviction and all, but I appreciate it, guys!

      I knew the market was going to tank. Was saving, waiting, planning. Timed it about right, I think.

      Anyone who hasn’t been living above their means should be sitting pretty right now. Great time to buy a house.

  3. AlteredBeast (blaming the OP one article at a time.) says:

    One thing that increased with foreclosure rates, which I find sad, is the number of pets brought into shelters.

    A dog is something that many people seem to adopt when they first get a new home. Either to protect the home, because their rental property didn’t allow it, or to complete an ideal family picture.

    Then they lose their home, and can’t take the pet to their new apartments. Also, the adorably adoptable puppy they got is now a full grown dog, and less likely to make it out of the dog pound alive.

    :(

  4. nataku8_e30 says:

    In defense of Texas, we had one of the highest foreclosure rates in the country going into this thing, so it really hasn’t increased THAT much.

  5. nakedscience says:

    That always makes me sad, AlteredBeast :(

  6. CreativeLinks says:

    Sorry, a little off topic here. But when anyone else hits the “reply button” on a comment, are they getting a page refresh and nothing else?

  7. floraposte says:

    Can somebody explain what that rate percentage is per state in the Forbes in-depth article? It’s clearly something other than simply percentage of the state’s homes in foreclosure (otherwise 156% of Nevada’s homes would be in foreclosure, which seems unlikely) but I don’t know what it does mean.

    • English, MF, do you speak it? says:

      @floraposte: It’s how many more homes are in foreclosure than a year ago. So for Nevada, if 1% of homes were in foreclosure in Feb 2008, 2.56% of homes were in foreclosure in Feb 2009. (2.56%-1%)/1% = 1.56 or 156%.

  8. nakedscience says:

    Yes, CreativeLinks, this has already been addressed in a recent post I am too lazy to look up. Hopefully it is fixed soon.

  9. pb5000 says:

    CreativeLinks yeah, I am but I think that’s being worked on.

    I live in Ohio and I was able to vulture my way into modest house for a very nice price. Yeah there are plenty of foreclosures in this state, and we even have our public officials urging people to stay in their foreclosed properties ([www.wtol.com] AND [consumerist.com]) but all in all my process worked out quite well for me.

  10. rugman11 says:

    It’s not a coincidence that the four states that saw the highest appreciation in home prices during the bubble also have the highest foreclosure rates. I don’t have the current numbers on me, but last time I checked California, Florida, Michigan, Las Vegas, and Phoenix accounted for approximately 40% of all foreclosures. That also happens to be five of the top six states. Not an accident.

    • GuinevereRucker says:

      @rugman11: Good point!

      What are the lessons here? Is it bad if your house appreciates in value too much?

      • rugman11 says:

        @GuinevereRucker: I think that lesson here is that debt and equity =/= wealth. Home equity is no more wealth than are unrealized stock gains. Also, nothing increases in price forever. The stock market will go down, home values will go down. People need to learn not to drink the Kool-Aid of perpetual equity and being “priced out forever.”

  11. Eyebrows McGee (now with double the baby!) says:

    Is that # of foreclosures or some kind of percentage related to population? — ah, if you go to the article, it shows both, but the ranking is by raw # of foreclosures, which makes California, Florida, and Illinois not as shocking, since they’re huge states. But it makes Arizona and Nevada much more upsetting, since they’re not nearly as big.

    (Texas is #8 by raw #s, but only #24 by total ratio of units to foreclosing units. Which actually makes Texas look pretty good since it’s the 2nd most populous state, after California.)

  12. theblackdog says:

    No surprise to see AZ at #3, my dad lives in Phoenix (yes, in Phoenix properly, not one of the many suburbs) and has just been watching the foreclosed homes show up one after another around him.

  13. calquist says:

    Yeah! Go Missouri! Oh wait… :( I live in Missouri.

  14. Trai_Dep says:

    I’m quietly floored that, for once, Texas isn’t the epicenter of national, gov’t-bailout-inducing fraud.

  15. originalread says:

    My parents live in the Foreclosure capital on Florida, Spring Hill. I’d move back from Orlando and pick up a cheap house but unless you are in the medical field, there are no jobs above $40k.

  16. MoreFunThanToast says:

    woot California and our atrociously high housing prices!

  17. kwsventures says:

    The foreclosure landslide should be a boom for landlords. Supply and demand should drive up rental rates at some point. I have a friend that leases apartments. He said, in the “old days” they would reject anyone with a foreclosure on their credit report. Now, they will accept those same people if they did not stiff everyone on their credit report.

  18. pecan 3.14159265 says:

    I would really like a dog. I’d love to have a dog (though it would have to get along with my rabbit) but I can’t afford to add a pet because of vet bills and the cost of food. But if I could, I’d adopt one of the poor dogs whose owners couldn’t bring to a different home. It’s just so sad for them because they’re totally innocent. They’re paying for the mistakes their owners made, and the first thing some people do is give away their pets, which is unavoidable for some people, and is a heartwrenchingly difficult decision to make. I don’t necessarily think there are a majority of people who actually wanted to give up their pet – I think most people moved into places that were too small or didn’t allow pets.

    • Eyebrows McGee (now with double the baby!) says:

      @pecan 3.14159265: Food costs aside (small dog, maybe?) a lot of areas have programs to help provide vet care costs for folks who otherwise can’t afford it — my county has very generous programs, largely funded by our pet registration fees, to help ensure pets of people who can’t afford it get spayed, neutered, vaccinated, and adequate preventative care.

      Or you might look into fostering programs, where you care for a pet that needs a home and they generally cover vet bills and often part of the cost of food, until it goes to a permanent home.

      There are also programs where you care for a serviceman’s dog while he’s deployed. Those often also come with money to help with vet and food bills.

  19. jake.valentine says:

    I was just offered a job in Atlanta which I initially had no intention of taking since I live in wonderful San Diego now. However, I looked at the homes in my price range and the prices are just ridiculously cheap. I can’t understand why homes are so cheap there, but maybe I have been in SoCal too long. Is Atlanta that bad of a place to live? Perhaps on par with Detroit? Now that my wife saw the beautiful, modern homes we could get there I may have to take the offer! At least I would be going from number 1 to number 9 on the list….

    • Anonymous says:

      @jake.valentine:
      Atlanta is great if you like to work, have a family and go somewhere else for vacation. Don’t plan on being able to head to the beach for a day trip. You’ll be spending 10 hrs driving. Atlanta is a working city, not a party city. Consider what you do for fun in San Diego.

      Don’t plan on buying a foreclosure if you’re moving here, banks are not processing offers at a reasonable rate (6 weeks backlog).

  20. Hybriddeathdealer says:

    Online gambling was taken away from consumers. That privilege was then given to banks and off the books to boot in 2005 amendment legislation. Consumers are rated in a fictitious and unregulated fashion. Banks are not. Supposed banks are taking back properties that they had nothing to do with. These entities are filing false claims against people who have never refinanced their homes and never made changes to their mortgages, just like credit card companies have been getting away with. Judges *always* find in favor of these false claims, because their re-election campaign funding depends on the banks being happy with that Judge’s results. Old people who once were secure in their homes, find themselves suddenly foreclosed on and thrown out of their homes, because of this thievery. Partly because banks are rallying to grab as much property as possible, desperately trying to re balance their books and the other part outright thieves.
    This is tantamount to someone standing inside a bank, holding *their* money and waiting for the judge to say, “The papers filed appear to be in legal order, I’m sorry for your loss, but there is no provision in the law for situations like these, all I can do is execute a stay of sale for 60 days, then the foreclosure will proceed and there is nothing I can do about it”… (Of course he, or she can throw the case out, but they don’t.)
    Meanwhile Freecreditreport.com and the others make millions from stealing from consumers, based on a false system that has nothing to do with a reality that only benefits them.
    Yet, consumers are fine with all this. Amazing! How about a nice revolution? One that takes back out homes and our country. For a change we can vote with the Independence our country was built on. Bunch of Lemmings…

  21. Velifer says:

    Where’s the list of the top 50?

  22. Starphantom12 says:

    For once I can say this… life is good in New Mexico. Housing market here isn’t booming like it was, but it’s not dying either.

  23. CumaeanSibyl says:

    I can’t make the reply button work, but rugman11: I hope you’re not including Michigan in the list of states that had high inflation of house values, because I’m pretty sure we had nothing of the sort. Home sales and prices have been declining in my area since at least 2005.

    Now, if we want to talk about having the highest unemployment rate in the nation, that’s more likely the source of the problem, because that’s also been going on for years. 11.6%, baby!

  24. u1itn0w2day says:

    I know in Florida the cost of living went up with all the new construction . The wages did not follow .

    The flippers , snow birds and landlord want to bes are now in a pickle .Funny thing is the Miami Herald called the overbuilding in Miami by 2003 with all the unsold condos . Makes selling short even tougher in a saturated overbuilt market . Hurricane Insurance slams the home buyer with costs as significant as an ARM adjustment as well .

    There were beach front condos that you could’ve bought before 2000 for around $200k . Peak of he boom they were going for $700K , they’re dropping back twards $200K . Too many bought at $400k hoping to get $700K : GAME OVER .

  25. Joe Felice says:

    The list is misleading because it doesn’t adjust for population. California and Florida should come after Nevada and Arizona, and Texas should be 24th.